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trapecia [35]
3 years ago
12

The original cost of a LIFO inventory item is below both replacement cost and net realizable value. The net realizable value les

s normal profit margin is below the original cost. Under the lower of cost or market method for LIFO or retail method inventories, the inventory item should be valued at
Business
1 answer:
serg [7]3 years ago
4 0

Answer:

D. Original cost.

Explanation:

As we know that the inventory should be valued at lower of cost or market value. Also , the market value is the middle amount among the replacement cost, net realizable value, net realizable value - normal profit margin

It can be the replacement cost or net realizable value. We don't have an idea which one is the middle amount

Also, if the original cost is less than the market cost so we assume that the inventory should be valued at original cost

You might be interested in
The Signal Company has operating income (EBIT) before depreciation expense of $1,500,000. The company’s depreciation expense is
ANEK [815]

Answer:

A. Net income is $825,000; and Net cash flow is $1,225,000.

B. Net income is $750,000; and Net cash flow is $1,150,000.

C. Parts A net cash flow will equal part B net cash flow by deducting $75,000 difference, or Parts B net cash flow will equal part A net cash flow by addiing $75,000 difference.

Explanation:

The following are given:

Operating income (EBIT) before depreciation expense = $1,500,000

Depreciation expense = $400,000

Tax rate = 25%

We therefore proceed as follows:

A. If the company is 100% equity financed (zero debt), calculate its net income and net cash flow.

<u>Calculation of net income</u>

Income after depreciation but before tax = Operating income (EBIT) before depreciation expense - Depreciation expense = $1,500,000 - $400,000 = $1,100,000

Tax expense = Income after depreciation but before tax * Tax rate = $1,100,000 * 25% = $275,000

Net income = Income after depreciation but before tax - Tax expenses = $1,100,000 - $275,000 = $825,000

<u>Calculation of net cash flow</u>

Net cash flow = Net income + Depreciation expense = $825,000 - $400,000 = $1,225,000

B. If the company (instead) has $100,000 in annual interest expense, recalculate the net income and net cash flow.

<u>Calculation of net income</u>

Income after depreciation and interest expenses but before tax = Operating income (EBIT) before depreciation expense - Depreciation expense - Interest expense = $1,500,000 - $400,000 - $100,000 = $1,000,000

Tax expense = Income after depreciation and interest expense but before tax * Tax rate = $1,000,000 * 25% = $250,000

Net income = Income after depreciation and interest expense but before tax - Tax expenses = $1,000,000 - $250,000 = $750,000

<u>Calculation of net cash flow</u>

Net cash flow = Net income + Depreciation expenses = $750,000 + $400,000 = $1,150,000

C. Explain the difference in your answers to parts A & B – specifically, reconcile the change in net cash flow that occurred.

Difference in net income = Part A net income - Part B net income = $825,000 - $750,000 = $75,000

Difference in net cash flow = Part A net cash flow - Part B net cash flow = $1,225,000 - $1,150,000 = $75,000

Each of Part A net income and net cash flow is $75,000 greater than part B because part A is an 100% equity financed with the need to pay annual interest expense on debt of $100,000 like in Part B before calculating the Tax expense and the net income.

The $75,000 diffence is as a result of additional tax that Part A has to paid on $100,000. That is,

Additional tax expense in part A = Interest expense not paid in Part A * Tax rate = $100,000 * 25% = $25,000

Diffrenrence = Intererest expense not paid in part A - Additional tax expense = $100,000 - $25,000 = $75,000

For example, if there is no annual interest of $100,000 to be paid in part B, we can then reconcile by just addinf back the difference as follows:

Part B new net cash flow = Part B initial cash flow + Difference in net cash flow = $1,150,000 + $75,000 =  $1,225,000 = Part A net cash flow

Also, if annual interest expense has to be paid in part A as a result of being now financed by debt, we will just deduct the difference as follows:

Part A new net cash flow = Part A initial cash flow - Difference in net cash flow = $1,225,000 -  $75,000 =  $1,150,000 = Part B initial net cash flow.

5 0
3 years ago
An arrangement in which local businesses team up with schools hiring students to perform jobs that use Knowledge and Skills taug
worty [1.4K]

Answer:

Cooperative Program

Explanation:

Cooperative Program is a type of program that enables people or individual that are into local businesses to join hands or team up with schools by employing or hiring the schools students in which they have teamed up with to carried out jobs or perform jobs that basically make use of the knowledge and the skills of what the students have learnt and have been taught by their teachers in the classroom reason been that this local business believes that this student have the essential knowledge and skill about the job that will enable them to excel and to do better when employed or hired.

5 0
3 years ago
A company uses the percent of sales method to determine its bad debts expense. Atthe end of the current year, the company's unad
nevsk [136]

Answer:

Explanation:

The journal entries are shown below;

Bad debt expense A/c Dr   $2,421

  To Allowance for doubtful debts  A/c  $2,421

(Being bad debt expense is recorded)

The computation of the bad debt expense is given below

= Net sales × estimated percentage given

= $807,000 × 0.3%

= $2,421

To determine the estimated bad debt expenses we debited the bad debt expense account and credited the allowance for doubtful debts

8 0
3 years ago
The ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lo
Sati [7]

Answer:

$15

Explanation:

The computation of the estimated variable cost per unit by using high low method is shown below:

Variable cost per unit = (High total cost - low total cost) ÷ (Highest level activity  - lowest level activity)

= ($110,000 - $87,500) ÷ (4,000 units - 2,500 units)

= $22,500 ÷ 1,500 units

= $15

By applying the above formula we easily find the estimated variable cost per unit

7 0
3 years ago
In a buying center, __________ have the formal or informal power to select or approve the supplier that receives the contract.
HACTEHA [7]

The <u>deciders </u>have the formal or informal power to select or approve the suppliers that receive the contract in a buying center.

<h3>What are buying centers?</h3>

A buying center is a jointed decision-making group that gathers individuals of an enterprise who engage or involve in the purchasing process for a certain product or a service.

A buying center is the collection of employees or members of any form of organization that are in charge of making big purchases.

Members of the buying center include

  • Buyers
  • Decider
  • User
  • Initiator
  • Influencer
  • Gatekeeper

Here, the <u>decider </u>has the formal or informal power to select or approve the suppliers that receive the contract in a buying center.

Learn more about buying center here:

brainly.com/question/8947097

3 0
2 years ago
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